This Working Paper analyses the competitive position of the pharmaceutical industry over the 2000-2017 period. The evolution of price/cost competitiveness and non-cost competitiveness is studied based on a comparison with our neighbouring countries France, the Netherlands and Germany, and with Denmark, Ireland, Slovenia and Switzerland. The study also analyses a series of global factors and factors specific to the pharmaceutical industry that may influence competitiveness.
Working Paper 05-19 [30/04/2019]
- DC2019_WP_02 [21/12/2018]
This working paper analyses the economic impact of a regulated professional services reform in Belgium through simulations based on the European Commission’s DSGE model QUEST III R&D
Working Paper 09-18 [30/06/2018]
At the request of the Ministerial Council and in collaboration with the Agency for Administrative Simplification (AAS), the Federal Planning Bureau carries out an estimate every two years of the administrative burdens for firms and self-employed in Belgium. This estimate is based on a survey of a representative sample of firms and self-employed. In addition to the quantitative part, the survey also includes an important qualitative part that shows how firms and self-employed view the problem of administrative burdens. This Planning Paper shows the results regarding the administrative burdens for 2016.
Planning paper 116 [22/03/2018]
The objective of the report is to provide an overview of the main drivers of economic growth and the productivity evolution in Belgium, in comparison with its three neighbouring countries and the US over 1970 and 2015. Recent evolutions, over 2000-2015, are analysed in details in order to shed light on the impact of the great recession. The growth accounting methodology is applied to explain labour productivity growth for the total economy, manufacturing and market services.
Working Paper 11-17 [17/10/2017]
Belgian government investment, and specifically the part spent on infrastructure, is relatively low both in historical terms and compared to neighbouring countries. A simulation with the European Commission’s Quest III model suggests that increasing government investment permanently by 0.5% of GDP leads to a growth in GDP, private consumption and private investment. The impact of alternative financing mechanisms is compared. Finally, a budget neutral shift of investment in favour of infrastructure is found to yield significant benefits in terms of GDP and its main components already in the medium run.
Working Paper 01-17 [26/01/2017]
Recent studies reveal the importance of entrants and young firms for job creation, productivity and economic growth. Some scholars argue that the falling rate at which new firms are established, can explain, to a certain extent, the productivity slowdown witnessed in most OECD countries. Belgium appears to stand out unfavourably from other countries in its very low start-up rate. This paper reviews the empirical cross-country evidence, provides some additional analysis of the role of young firms in industry-level employment and productivity dynamics in Belgium and concludes with a discussion of the implications for economic policy.
Working Paper 06-16 [24/06/2016]
- Planning paper 115 [29/02/2016]
The paper analyses the long-term trend of Belgian economic growth and the more recent evolution of labour productivity including the impact of the crisis. It identifies the causes of declining trend of productivity gains by analysing the structural changes in the economy and by applying the growth accounting methodology on industry-level data. Finally, possible policy actions are detailed which minimise the negative short term impact on aggregate demand while maximising the positive effect on labour productivity growth.
Working Paper 06-15 [02/10/2015]
This article presents a traditional shift-share decomposition to identify contributions of three effects on the rise in the hourly wage cost in Belgium: changes in the industry composition of total hours worked (composition effect), changes in the structure of employment in terms of categories of workers (employment structure effect), and increases in the hourly wage cost of these individual categories (wage effect).
Working Paper 01-15 [21/01/2015]
The present document is the fourth biannual progress report in which the Federal Planning Bureau (FPB) gives an account of the monitoring of the economic stimulus strategy announced by the Federal government in the summer of 2012.
This progress report gives an overview of the measures to follow up and reviews the progress of their implementation (situation on June 30, 2014).
OPREP201403 [Contributor - 17/07/2014]
- Planning paper 114 [20/02/2014]
- Article 20121127 [27/11/2012]
- Planning Paper 112 [26/11/2012]
Headlines Belgian economy
Since the start of 2012, tensions in money and bond markets have receded somewhat in most euro countries. Together with the recent uptick in most confidence indicators, this is expected to lead to a bottoming out of European GDP. Assuming the sovereign debt crisis does not intensify again, economic activity should gradually pick up in the second half of the year. Nonetheless, on a yearly basis, this implies negative euro area GDP growth of -0.3%, which is a substantial downward revision as compared to our September forecasts (1.2%). This scenario remains highly uncertain, with renewed turmoil in financial markets as the main risk.
Belgian economic growth amounted to 1.9% in 2011, although economic activity fell slightly during the second semester. In 2012, quarterly growth should remain very modest against the background of a gradual pick-up in the European business cycle and of the austerity measures already taken by the Belgian government. Economic activity ought to stabilize in 2012Q1, followed by a slight export-led upturn (up to qoq growth of 0.2% in 2012Q4). Economic growth should remain limited to 0.1% on a yearly basis.
Due to the lack of dynamism in the business cycle, job creation has stagnated since mid-2011 and should only slightly recover in the course of this year, leading to an average annual increase of 6 400 units in 2012. As a result, the harmonised unemployment rate (Eurostat definition) should rise from 7.2% in 2011 to 7.5% in 2012.
Our most recent inflation forecasts were finalised at the end of February. Belgian inflation, as measured by the yoy growth rate of the national consumer price index, should amount to 3.0% on average this year. This upward revision (compared to our 2.7% forecast at the end of January) is largely due to price increases for energy products as a result of higher oil prices.
STU 1-12 was finalised on 16 March 2012.
Short Term Update 01-12 [Contributor - 16/03/2012]
- Planning Paper 110 [28/02/2012]
This working paper analyses the performances of the Walloon innovation system in 2010. It concentrates on the six dimensions of the innovation system: knowledge development, human resources, R&D valorisation, innovation absorption capacity, entrepreneurial skills and financing capacity. These pillars are assessed by comparing the Walloon performances with those of European countries and regions with a similar industrial heritage. The analysis underlines the good performances of the mobilisation of financial resources in favour of R&D activities but also a potential problem in terms of human resources available for these activities. Maintaining a sufficient flow of competence by new science graduates and engineers and by the implementation of lifelong learning remains the key challenge in the years to come.
Working Paper 04-12 [28/02/2012]
Headlines Belgian economy
The European Union set up the Europe 2020 Strategy as the successor to the Lisbon Strategy to monitor and stimulate structural reform by the Member States. In the first semester of each year (the so-called European Semester), the Member States compile their Stability & Convergence and National Reform Programmes. At the turn of the semester the European Council develops policy recommendations to be implemented, preferably during the second semester. Sound performance on structural issues lays a foundation for healthy potential growth around which the business cycle oscillates.
Following the calendar of this renewed strategy, the Federal Planning Bureau decided to move the structural performance update – traditionally published in December - to the March issue and adapt the calendar of the business-cycle updates accordingly. The present December issue is, however, a one-off issue exclusively devoted to the system of innovation. Innovation has been recognised in the Europe 2020 strategy as the first of seven ‘flagships’ that should secure smart, sustainable, and inclusive growth. Innovation should have a positive impact on productivity growth and hence encourage potential GDP growth and employment. Measured in terms of R&D, not more than a few Member States achieve an innovation effort that is comparable to that of the other advanced economies of the world.
The system of innovation is an assembly of six interlinked dimensions: knowledge development by R&D; human resources; valorisation of R&D, e.g. through patents; innovation absorption capacity within and among enterprises; entrepreneurship; and financing. A good performance on each of the six is needed for a system to perform optimally. This December issue monitors the performance of Belgium on each of the dimensions. Other EU countries, the USA, and Japan serve as a benchmark. The performance seems to be mixed, so efforts are still needed to drive further improvement of the Belgian innovation system as a condition for growth and jobs.
STU 04-11 was finalised on 16 December 2011.
Short Term Update 04-11 [Contributor - 16/12/2011]
- OPCOMP2011_1 [20/09/2011]
In this Working Paper the impact of potential determinants of total factor productivity, i.e. the part of output that cannot be explained by the quantity of production factors, is estimated for Belgium using industry-level data for the period 1988-2007.
Working Paper 07-11 [26/04/2011]
Headlines Belgian Economy
In October, the FPB prepared an update of its medium-term economic outlook of May 2010. This new outlook covers a longer period (2010-2020) than usual because it was drawn up in the framework of the macroeconomic surveillance process under the Europe 2020 Strategy, with a view to the preparation of the draft Belgian National Reform Programme.
This new outlook for Belgium is based on an international context that is marked by a recovery that should emerge in 2010-2011 and even gain momentum in the medium term. Nevertheless, the uncertainty surrounding these forecasts continues to be higher than before the financial crisis. Large budget deficits and global imbalances continue to threaten the stability of worldwide economic growth.
Yearly Belgian economic growth should amount to approximately 1.8% in 2010 and 2011 (based on our September forecast described in STU 3-10) and fluctuate around 2% thereafter. After a sharp decline in 2009, domestic demand has been expected to rise again in 2010, despite the on-going fall in business investment. As of 2011, domestic demand should rise at an average yearly rate of 1.8% as its various components regain their trend-based growth. Belgian exports, which fell by 11% in 2009, have recovered significantly in 2010. Thereafter, exports should grow at a rate close to its historical average. The contribution of net exports to GDP growth should be positive for the whole projection period (0.3-0.4 %-points on average for 2012-2020). Employment seems to have already experienced a moderate recovery in 2010.
Employment should increase further in 2011 and 2012, but at a limited pace as employers try to push up labour productivity and average working time from the historically very low levels that they reached in 2009. From 2013 to 2015, employment growth should become more sustained before gradually dropping again towards the end of the forecast. Employment as a percentage of the population aged between 20 and 64 years should initially fall from 68% in 2008 to 66.9% in 2010, but should recover to 68.2% in 2015 and 69.8% in 2020, a rate still well below the 75% target set by the EU. Unemployment (broad
administrative definition) is expected to peak in 2012 at a level that is 103 000 units higher than in 2008. From 2013 onwards, unemployment should slowly decline and reach 591 000 units in 2020.
The general government budget deficit should shrink from 6% of GDP in 2009 to 4.8% of GDP in 2010, 4.6% in 2011 and 4.5% in 2012. Thereafter, the deficit should remain almost constant up to 2020. A further and considerable fiscal adjustment is thus necessary to cut back the deficit to 3% of GDP in 2012 and achieve a balanced budget in 2015 in accordance with the Stability Programme of January 2010.
STU 04-10 was finalised on 22 December 2010.
Short Term Update 04-10 [Contributor - 22/12/2010]
- Working Paper 18-10 [21/10/2010]
Since mid-2009, the world economy has been recovering from one of the worst post-war economic crises. As of mid-2010, world economic growth should slow down as stimulus measures are gradually reduced or phased out and stock building becomes less of a support to economic growth. Moreover, western economies now face major challenges in restoring health to public finances. As a result, the international context remains surrounded by major uncertainties, with downside as well as upside risks.
During the second half of 2009, the Belgian economy posted positive quarterly growth rates driven by recovering exports and an acceleration of private consumption growth. In 2010Q1, the economic recovery was, however, interrupted due to a drop in construction activity owing to the cold weather. Strong GDP growth in 2010Q2 (0.9%) was in turn partly due to a catch-up by the construction sector, but exports boomed as well because of the strong growth of the German economy. In line with the international business cycle, qoq GDP growth should decelerate to 0.3% on average during the second half of 2010. In the course of 2011, export growth should pick up again, resulting in average quarterly GDP growth of 0.5% in the second half of the year. On an annual basis, GDP growth should amount to 1.8% in 2010 and 1.7% in 2011.
The past recession has had a smaller impact on domestic employment than initially expected. A temporary strong decrease in hourly labour productivity and in average hours worked per person softened the downward impact on the number of employed persons. Consequently, the net decrease in employment in 2009 was limited to 17 500 persons (-0.4%). Hourly labour productivity and average working time should catch up in the course of this year and next year. Combined with a modest economic recovery, the net increase in employment should therefore remain limited to 10 100 persons in 2010 and 4 700 in 2011. The harmonised Eurostat unemployment rate (which is based on labour force surveys) is expected to increase from 7% in 2008 to 9% in 2011.
During recent years, Belgian headline inflation (as measured by yoy growth of the national index of consumer prices) has primarily been influenced by the evolution of raw materials prices. As from May 2010, underlying inflation has also been creeping up. In the course of the next year, underlying inflation should remain on an uptrend. Nevertheless, consumer price inflation is expected to decelerate somewhat because of the quasi-stabilisation of energy prices. On an annual basis, inflation should drop from 2.1% in 2010 to 2% in 2011.
STU 3-10 was finalised on 1 October 2010
Short Term Update 03-10 [Contributor - 01/10/2010]
The new medium-term outlook for Belgium is based on an international context that is marked by a stronger-than-expected recovery, particularly spurred on by the large Asian emerging economies and the American economy. Nevertheless, the uncertainty surrounding these forecasts continues to be higher than before the financial crisis. The important budget deficits and global trade and capital flow imbalances continue to threat the stability of worldwide economic growth.
The yearly growth of the Belgian economy should amount to 1.4% in 2010 and 1.7% in 2011 and exceed 2% in 2012-2015. After a sharp decline in 2009, domestic demand should start rising again in 2010, despite the ongoing fall in business investment. As of 2011, domestic demand should rise at an average yearly rate of just above 2% as its various components regain their trend-based growth. Belgian exports, which fell by 11% in 2009, are expected to recover from 2010 onwards. The contribution of net exports to GDP growth should be largely positive in 2010 (+0.7%-points) and weaken from 2011 onwards (+0.2%-points on average) due to the acceleration in domestic demand.
Belgian inflation should not exceed 2% on a yearly basis as the limited increase in nominal unit labour costs (average annual growth of 1% during the period 2010-2015) should keep underlying inflation in check. However, this limited increase masks a decline in 2010 followed by a gradual acceleration to 2% in 2015.
Employment should decline by 33 000 units in 2010 and increase by as little as 7 000 units in 2011. As economic growth accelerates in 2012-2015, employment should expand by nearly 50 000 persons per year on average. Employment as a percentage of the population aged between 20 and 64 years, should initially fall from 68% in 2008 to 66.3% in 2010 but should recover to 67.7% in 2015, a rate still far below the 75% target set by the EU. In 2012, unemployment (broad administrative definition) is expected to peak at a level that is 128 000 units higher than in 2008. From 2013 onwards, unemployment should slowly decline and reach 698 000 units in 2015.
The general government budget deficit should shrink from 5.9% of GDP in 2009 to 4.8% of GDP in 2010. However, under the assumption of constant policy, the deficit should again exceed 5% of GDP from 2011 onwards. A further and considerable fiscal adjustment is thus necessary to cut back the deficit to 3% of GDP in 2012 and achieve a balanced budget in 2015 in accordance with the Stability Programme of January 2010.
STU 2-10 was finalised on 1 June 2010.
Short Term Update 02-10 [Contributor - 22/06/2010]
- Working Paper 14-10 [28/05/2010]
The compliance costs of private taxpayers are not only affected by the tax law itself but also by its implementation through the tax authorities. In the following paper we analyze the effect of administrative actions on the compliance costs of private businesses. We demonstrate in a theoretical model that compliance costs may partially be interpreted as externalities of authority behavior. As a result we expect a ”shifting” of administrative cost burdens from the tax administration to private taxpayers, what implies an economically inefficient outcome. Based on Belgian survey data, we find empirical evidence for the elucidated relationship. We give an quantitative estimate for the accordant effects and demonstrate, which activities of the administration are the most important cost drivers. Furthermore, we find empirical support that the effect of administrative issues is independent from the impact of the tax law itself.
Working Paper 09-10 [20/04/2010]
According to our February forecast, quarterly GDP growth should remain limited to 0.3% on average in the course of 2010, which is about half of the quarterly growth in the second half of 2009. This slowdown is in line with the international business cycle, which should temporarily lose momentum to the extent that monetary and budgetary stimuli fade and restocking comes to an end. In the course of 2011, exports should pick up and domestic demand should gain momentum, resulting in average quarterly GDP growth of 0.6%. On a yearly basis, Belgian GDP should increase by 1.4% in 2010 and 1.7% in 2011, after a drop of 3% last year. This means that real GDP should remain below its pre-crisis level until late 2011.
Net job losses reached 23 200 persons on average in 2009 and should add up to 46 100 this year. This trend should reverse in 2011, with a net creation of 8 600 jobs. Given the evolution of the labour force, the number of unemployed (broad administrative definition) should increase by 52 900 persons this year (after going up by 45 000 persons in 2009) and by almost 29 000 persons in 2011. As a result, the harmonised Eurostat unemployment rate (which is based on labour force surveys) is expected to reach 8.8% in 2011, compared to 7% in 2008.
Headline inflation in Belgium, as measured by yoy growth of the national index of consumer prices, was negative from May to November 2009, which was mainly due to the negative impact of energy prices. As a result, overall inflation remained just below zero in 2009. At the end of last year, the base effect of the drop in energy prices had disappeared. Combined with a gradual increase in oil prices, headline inflation should rise to 1.7% in 2010 according to our inflation forecast of March.Short Term Update 01-10 [Contributor - 19/03/2010]
- Working Paper 01-10 [22/02/2010]
- Planning Paper 108 [20/01/2010]
In view of the new round of stability and convergence programmes (SCP) by the EMU member states, the FPB transmitted a medium-term outlook for the Belgian economy to the federal government. In this outlook, the short-term international assumptions are based on the November forecasts of the EC. These assumptions result in a gradual recovery of Belgian GDP in 2010 (0.8%) and 2011 (1.6%), after a decline of 3.1% in 2009. More information on this simulation can be found on pages 5-6.
As world trade appears to recover at a faster pace than expected in the EC outlook, the FPB produced a technical update of the SCP-simulation. This second simulation results in relatively stronger Belgian economic growth in 2010 and 2011 (1.1% and 1.7% respectively). From 2012 to 2014 economic growth is expected to be 2.1% on average, which might not be sufficient to close the output gap by 2014. Comments in the next paragraphs are based on this exercise.
Private demand was heavily affected by the financial and economic crisis. Private consumption suffered from a lack of confidence which brought an important increase along in the savings rate in 2009. In the medium term, consumption growth should gradually recover but remain below 2%. Gross fixed capital formation plummeted in 2009 and is unlikely to recover soon as idle production capacity is still abundant. From 2011 to 2014, average investment growth should amount to 2.1%. Exports declined by more than 10% in 2009, but should recover from 2010 onwards and reach an average growth rate of 4.4% from 2011 to 2014.
As employment typically reacts with a lag to the business cycle, the decrease in employment should even be stronger in 2010 than in 2009, before increasing gradually from 2011 onwards. The (broad administrative) unemployment rate should increase by 2.5 percentage points in 3 years and reach 14.3% in 2011. From 2012 onwards the unemployment rate should diminish somewhat, but total administrative unemployment should still amount to more than 730 000 persons in 2014 (130 000 persons more than in 2008).
Due to the recession the public deficit increased to 5.8% of GDP in 2009. Under an unchanged policy assumption the net public financing requirement should decline by 0.6% of GDP in 2010 and roughly stabilise somewhat below 5.5% in the medium term.
STU 04-09 was finalised on 21 December 2009.Short Term Update 04-09 [Contributor - 21/12/2009]
After the escalation of the financial crisis in September 2008, the industrialised countries were pulled into a deep recession. The main uncertainty that currently surrounds economic forecasts concerns the robustness of the international economic recovery. In fact, monetary and fiscal policies have been able to stabilise the world economy more rapidly than expected, but it remains difficult to predict whether the economic recovery is able to withstand the fading out of the impact of the economic stimulus measures.
According to our September forecast, Belgian GDP growth should become slightly positive in the second half of 2009. In the course of 2010, economic growth should also be supported by domestic demand. Quarterly GDP growth should pick up further in the course of 2011 and reach 0.6%. This will result in annual GDP growth rates amounting to 0.4% in 2010 and 1.9% in 2011, after a drop of 3.1% this year.
Whereas total net job creation still amounted to 71 200 persons on average last year, 34 600 jobs should be lost this year. In 2010, job losses should add up to 58 900 on average. In 2011, a net job creation of 17 600 persons on average is expected. Given the evolution of the labour force, the number of unemployed (broad administrative definition) should increase by 53 900 persons this year, by 98 400 next year and a further 23 300 persons in 2011. As a result, the harmonized Eurostat unemployment rate (which is based on labour force surveys) is expected to reach 9.6 % in 2011, compared to 7% in 2008.
According to our inflation update of October, headline inflation (as measured by yoy growth of the national index of consumer prices) has become negative since May and should remain so until November 2009. The yoy decrease of the index results from the price evolution of a limited number of products and is temporary. Underlying inflation should cool down further as a reaction to weak economic activity and the gradual pass through of lower energy prices into the prices of other goods and services, but should remain clearly positive. This year, inflation should be zero on average, mainly due to the negative impact of energy prices. As oil prices should increase gradually, their negative impact on inflation should disappear, resulting in a rise in inflation to 1.3% in 2010, despite the decrease in underlying inflation (from 2% in 2009 to slightly above 1% in the second half of 2010).
STU 3-09 was finalised on 6 October 2009Short Term Update 03-09 [Contributor - 23/10/2009]
This paper investigates the relationship between the relative positions, in terms of value added and relative prices, of Belgian manufacturing and market services in the European Union over 1970-2005. Relative prices are then broken down into relative unit costs of production factors. The analysis goes further by decomposing relative unit labour cost into relative hourly wages and relative productivity. Finally, relative productivity is broken down into relative capital deepening, relative labourArticle 2009100605 [06/10/2009]
composition effect and relative total factor productivity.
This paper investigates graphically and econometrically the relationship between the relative positions, in terms of value added and relative prices, of Belgian manufacturing and market services in the European Union over 1970-2005. Relative prices are then decomposed into relative unit costs of factors of production. The analysis goes further by replacing relative unit labour cost with relative hourly wages and relative productivity. Finally, relative produc-tivity is replaced with relative capital deepening, relative labour composition effect and relative total factor productivity. All data are coming from the EUKLEMS database, March 2008 release.Working Paper 09-09 [15/09/2009]
The new medium-term economic outlook for Belgium has been drawn up in an international context that is heavily influenced by the financial crisis and the deep economic recession this has brought about. Belgian GDP should fall by nearly 4% in 2009, followed by zero growth in 2010 as the crisis subsides. In the wake of a worldwide recovery, Belgian GDP growth should start accelerating from 2011 onwards, resulting in average growth for the period 2011-2014 (2.3%) that is similar to the average of the past twenty years. Note that the global economic situation is beset with many uncertainties and, therefore, the outlook is surrounded with considerable risks, especially for the short term.
Households are expected to raise their precautionary savings dramatically in 2009, thus lowering their consumption compared to last year (-0.6%). Strongly unfavourable demand prospects, combined with a sharp drop in profitability and deteriorated external financing conditions will lead to a sharp contraction in business investment (-7.5%). Domestic demand should recover slightly in 2010 and more markedly from 2011 onwards. The volume of Belgian exports is expected to go down for two years in a row (-8.9% in 2009 and -0.6% in 2010) and the contribution of net exports to GDP growth should be largely negative. From 2011, Belgian export growth should be close to its historical growth rate (4.8%). After a peak in 2008 (4.5%), the inflation rate should fall to 0.3% on average in 2009. In the medium term, inflation is expected to pick up again, but to remain below 2%.
The effects on employment of the sudden fall in activity should materialise progressively: domestic employment should drop on average by 37 000 jobs this year and by 53 000 jobs next year. The recovery in 2011 should not be labour-intensive and employment is only expected to increase significantly from 2012 onwards (by a little more than 43 000 jobs a year on average). This evolution of employment, combined with an increase in the labour supply, should lead to a rise in unemployment of 194 000 units from 2009 to 2011. In the next three years, the unemployment rate (broad administrative definition) should go up from 11.8% to 15.2%. As from 2012, the unemployment rate should gradually decrease to reach 14.5% in 2014.
Under the assumption of constant policy, public sector accounts are expected to deteriorate markedly, with a net public financing requirement of 4.3% of GDP in 2009, widening to 5.6% of GDP in 2010. The end of the recession will not lead to a reduction in the deficit, which should peak at 6.1% of GDP in 2012 before slightly improving afterwards. As a result, Belgian public debt should again experience a snowball effect, going up from 89.3% of GDP in 2008 to 106% of GDP in 2014.
STU 2-09 was finalised on 27 May 2009Short Term Update 02-09 [Contributor - 10/06/2009]
- Working Paper 05-09 [15/04/2009]
In 2008Q4, the financial crisis and the recession faced by the main trading partners took their toll and caused Belgian GDP to fall by 1.3% qoq. According to our February forecast, Belgian economic activity should continue to contract in the course of 2009 and only stabilise in the fourth quarter. As a consequence, Belgian GDP is projected to fall by 1.9% in 2009, after an increase of 1.1% in 2008. Despite the considerable downward revision of Belgian GDP growth for 2009 (last September a positive economic growth of 1.2% was forecast), the uncertainty surrounding this forecast remains exceptionally large and downside risks are likely to be greater than upside risks.
Belgian exports should fall by 4.6% this year, after an increase of 2.2% in 2008. Imports should decrease less than exports. Despite the drop in oil prices and the appreciation of the euro, the current account balance should remain negative and reach -1.8% of GDP in 2009.
In 2008, private consumption increased by 0.9%. The negative growth of private consumption in 2009 (-0.4%) is mainly due to historically low consumer confidence and negative wealth effects caused by the drop in asset prices. This should lead to a strong rise in the households' savings rate (up to 15.8%). Worsened demand prospects, the decline in business profitability, falling capacity utilisation rates and tightened lending conditions should exert a drag on business investment in 2009, which should fall by 4.6%. Household investment growth should also turn negative in 2009 (-1.6%), although this contraction will be mitigated somewhat by a temporary VAT reduction. Only public consumption and public investment growth rates are expected to remain positive.
This year, an average (net) loss of 24 700 jobs should be registered. Job losses in the course of 2009 will be far worse than appears from the annual averages: in 2009Q4, employment should be 59 100 persons lower than in 2008Q4. The harmonised Eurostat unemployment rate (which is based on labour force surveys) is expected to reach 8.2% in 2009, compared to 7.1% in 2008.
Despite high underlying inflation during the first half of 2009, total inflation, as measured by the yoy increase in the national index of consumer prices, should continue to decrease and even become slightly negative during summer. Only in the second half of this year should the expected oil price increase be reflected in inflation evolution. According to our inflation update of March, average inflation should decline from 4.5% in 2008 to 0.5% in 2009.
STU 1-09 was finalised on 2 March 2009.Short Term Update 01-09 [Contributor - 02/03/2009]
The Working Paper analyses the performances of the Walloon innovation system in 2008. This analysis concentrates on the six dimensions of the innovation system: knowledge development, human resources, R&D exploitation, innovation absorption capacity, entrepreneurial skills and financing capacity. These foundations are evaluated by comparing the performances of the Walloon innovation system with the performances of innovation systems of other countries and regions in Europe. They were chosen for their socio-economic proximity to the Walloon region. The examination of the Walloon innovation system reveals a problem that is essentially connected with the capacity to turn research and innovation efforts into economic results that are sufficient for the Region.Working Paper 02-09 [10/02/2009]
- OPFINCR0901 [07/01/2009]
The FPB has revised its medium-term outlook for 2008-2013 for the Belgian economy. For the 2008-2010 period, the outlook adopts the international economic scenario provided by the OECD outlook of November 2008. The uncertainty surrounding the results is exceptionally large and downside risks could prove to be greater than upside risks. The greatest downside risks include a longer than expected period of distress on financial markets, and that emerging markets could be hit harder than anticipated.
The outlook for Belgium shows average GDP growth reaching only 1.5% during the period 2008-2013 (1.9% for the period 2001-2007). This relatively weak performance is largely explained by weak GDP growth in 2008 (1.4%), a fall in economic growth next year (-0.3%) and a limited recovery in 2010. Over the period 2011-2013, GDP growth is expected to stabilise at a rate slightly above 2%, which might not allow the output gap to be completely closed by the end of the projection.
After dynamic growth in 2007, private consumption expansion should be much more limited in 2008 and 2009. From 2010 onwards, household demand growth should increase gradually and then stabilise at a rate close to 2%. After dynamic growth in 2008, gross fixed capital formation should slightly decrease in 2009, before recovering in 2010 and increasing by 2.4% on average during the 2011-2013 period. Given the unfavourable international environment next year, exports are expected to decrease in 2009. Over the period 2010-2013, exports should increase by 4.4% on average and the contribution of net exports to GDP growth is expected to be slightly positive.
The worsening of the economic situation should lead to a decrease in employment in 2009. In the medium term, employment should increase again, at a yearly rate reaching 0.8% at the end of the projection. With employment growth heavily affected by the adverse economic situation in the short run and in view of the increase in the labour force, the unemployment rate (broad definition) will soar to 12.9% by 2010 (against 11.9% in 2008), before levelling off at around 13.2% from 2011 onwards. Total administrative unemployment should stand at almost 700,000 persons in 2013 (65,000 persons more than in 2007).
Under the assumption of unchanged policy, the public accounts are expected to deteriorate markedly, with a net public financing requirement of 1.6% of GDP in 2009, 2.4% in 2010 and up to 2.6% in 2011-2013.
STU 04-08 was finalised on 11 December 2008.Short Term Update 04-08 [Contributor - 11/12/2008]
Since mid-September, the financial crisis has entered an exceptionally turbulent new phase. The US and European authorities have had to take extraordinary measures in order to deal with solvency and liquidity problems in the banking sector. As financial conditions are likely to remain difficult, it is obvious that the crisis will have large negative effects on the world economy, although the size of these effects is currently very difficult to grasp due to huge uncertainties concerning the magnitude and the duration of the crisis.
This uncertainty explains the volatility of most indicators, which makes it currently very difficult to establish credible economic forecasts. The latest short-term forecasts of the FPB were finalised in the first half of September, i.e. before the aggravation of the financial turbulence. According to these forecasts, Belgian GDP growth should amount to 1.6% in 2008 and slow down to 1.2% in 2009. The 2009 government budget is based on this outlook.
In the light of recent financial sector developments, the latest FPB forecasts should be revised downwards, in line with revisions of economic growth by national and international institutions. In fact, the weakening of economic growth in the course of 2008 will probably be stronger than expected, while the subsequent recovery could take longer to materialise and could lack strength. The channels through which the financial crisis is affecting the real economy are discussed in the Special Topic of this Short Term Update.
Belgian business and consumer confidence have dropped to their lowest level in more than five years due to weakening economic growth and the financial crisis, which are tending to reinforce one another. Moreover, consumer confidence has suffered from the high number of lay-offs in large Belgian companies. On the other hand, the decline in oil prices and the depreciation of the euro have limited the worsening of sentiment somewhat through their positive effect on households’ purchasing power and export competitiveness.
Inflation forecasts for 2009 have been revised downwards since September, which is the result of two counteracting factors. In fact, the downward effect of falling oil prices on inflation is partly compensated by the stronger than expected increase in underlying inflation. According to our end-of-October inflation update, the increase in the national index of consumer prices should slow down from 4.6% in 2008 to 1.9% in 2009.
STU 3-08 was finalised on 31 October 2008.Short Term Update 03-08 [Contributor - 12/11/2008]
- OPFINCR08 [30/10/2008]
The objective of the report is to provide an overview of the main drivers of economic growth and the productivity evolution in Belgium, in comparison with the EU and the US, between 1970 and 2005, based on a consistent data set. The growth accounting methodology is applied to explain value added and labour productivity growth for the total economy, manufacturing and market services. This decomposition exercise diverges from what has been applied in Belgium up to now, as it uses capital services flows rather than the capital stock and labour services flows rather than the number of hours worked to measure the contribution of these factors of production to economic and productivity growth. Contributions of the main industries to value added, employment and productivity growth are also estimated.Working Paper 17-08 [29/09/2008]
Using dynamic panel data on 20 Belgian market sectors over 1987-2005, the paper analyses the link between Multifactor Productivity (MFP) growth and three frequently cited determinants: business R&D, labour skills and ICT use. The theoretical framework of the analysis is given by the Aghion-Howitt model which explains the rate of MFP growth by the distance to the world technology frontier.Working Paper 11-08 [29/06/2008]
The medium-term outlook for Belgium points towards an average GDP growth rate of 2% for the period 2008-2013. A slowdown is expected for the Belgian economy in 2008 and 2009 (GDP growth of only 1.7%), mainly as a consequence of less dynamic exports and a moderate increase in domestic demand. Belgian GDP growth should accelerate in 2010, thanks to the more favourable international environment and a more dynamic development of domestic demand. From 2011 onwards, Belgian GDP growth should stabilise slightly above its potential (equal to 2% on average). Note that the global economic situation is beset with many uncertainties and, therefore, the outlook is surrounded with considerable risks, especially for the short term.
The average yearly growth rate for private consumption should reach 1.7% for the period 2008-2013, which is slightly lower than the increase in households’ real disposable income. Purchasing power will be handicapped in 2008 by the high inflation rate (3.8%), but should be underpinned afterwards by employment growth and by higher increases in wage rates and social benefits. Investment growth should reach 2.8% for the period 2008-2013, reflecting the path of business investment growth (supported by business profitability and stable demand prospects after 2009). Growth in exports should reach 5% on average and the contribution of net exports to GDP growth is expected to be 0.1%-points. After an acceleration in 2008, the inflation rate should stabilise slightly below 2% for the period 2009-2013. This rather low inflation rate is mainly due to a moderate increase in imported costs and the persistence of a negative output gap until 2013.
The expected evolution of employment reflects a relatively favourable macroeconomic environment and persistently modest labour productivity growth (1.2% per year). After a particularly high number of new jobs created in 2007 (70,000), employment growth should remain sustained: about 42,000 units should be created every year during the period 2008-2013. Between 2007 and 2013, manufacturing industrial employment should fall by 35,000 but the number of jobs created in market services should exceed 270,000. Nevertheless, in view of the increase in the labour force (notably explained by incoming migration), the fall in unemployment should be limited to 22,000 persons. The unemployment rate (broad administrative statistics) should fall from 12.6% in 2007 to 11.6% in 2013.
Under the assumption of constant policy, public accounts are expected to deteriorate markedly, with a net public financing requirement of 0.3% of GDP in 2008, widening to 0.8% of GDP in 2009 and 0.9% of GDP in 2010, before gradually falling to 0.4% by the end of the projection period. Nevertheless, the total public debt to GDP ratio will continue to decline, from 84.8% in 2007 to 70.8% in 2013. [STU 2-08 was finalised on 26 May 2008]Short Term Update 02-08 [Contributor - 26/05/2008]
- Planning Paper 103 [26/03/2008]
- Working Paper 06-08 [10/03/2008]
On the basis of its short term economic forecast of September and revised figures for the medium-term international economic environment, the FPB has updated its medium-term outlook 2007-2012. GDP growth should reach 2.1% on average and should be driven by both domestic demand and exports, although the structural loss of export market shares should remain significant: while growth in our potential export markets will reach 6.8% a year on average, exports are expected to record an average annual increase of 5.4%.
The growth of private consumption (1.8% on average) should be in line with the growth of real disposable income (1.9% on average). Gross fixed capital formation should continue to register sustained growth, attaining an average of 3.1%, mainly reflecting an increase in business investment, but also an acceleration of public investment in view of the local elections of 2012. Inflation (as measured by private consumption deflator growth) should be below 2% on average during the projection period, despite an acceleration in 2008: inflation could even climb to 2.5% next year, according to the latest update of the monthly inflation forecasts of FPB. Limited wage increases (lower than productivity gains), the increase in interest rates, a negative output gap and a moderate increase in imported costs are the main factors accounting for the low inflation rate in the medium term.
Total employment will increase by more than 40,000 jobs a year on average during the projection period, due to sustained economic growth combined with persistently modest labour productivity (1.4% per year). Due to ongoing structural shifts in the sectoral composition of employment, the manufacturing industry will incur a further loss of 6,000 jobs a year on average, whereas market services should gain 46,000 jobs a year. The employment rate is expected to increase from 62.6% in 2006 to 65.4% in 2012; the fall in the unemployment rate (from 13.8% in 2006 to 11.0% in 2012 -broad definition) should accelerate at the end of the projection period, when baby-boomers will leave the labour force on a massive scale.
The pace of employment growth should have nearly doubled during the period 2001-2012 compared with the previous decade, despite very similar average economic growth rates for both periods.
STU 04-07 was finalised on 10 December 2007.Short Term Update 04-07 [Contributor - 13/12/2007]
In order to improve our understanding of the divergent evolutions that recently emerged between European countries in terms of labour productivity, this paper compares the labour productivity growth of three small open European countries: Austria, Belgium and the Netherlands. The analysis focuses on market services as they are the most important single factor that is responsible for the divergences. The comparison shows that, while Austria and Belgium recorded a decrease in their productivity growth between 1995 and 2004, the Netherlands followed the American pattern and has recorded an increase in their growth rate since 1995. The decomposition of labour productivity growth makes it possible to underline the important role played by total factor productivity (TFP) in the Dutch upsurge in productivity growth. The breakdown of the data by industry shows the importance of the Distribution sector in the Dutch performance. The growth of TFP observed in the Distribution sector is then linked to different potential determinants: ICT accumulation and use, labour qualifications, R&D and innovation and regulations.Working Paper 14-07 [05/11/2007]
This year, the Belgian economy should register an increase in GDP of 2.7%. In 2008, economic growth is expected to slow down to 2.1%.
In 2006, Belgian exports grew significantly slower than the relevant export markets. Belgian exporters thus suffered from important losses of market share. Despite a steady deceleration of growth in the relevant export markets this year and next year, export growth should accelerate somewhat. Consequently, losses of export market shares should be more in line with their historical trend. The current account balance has worsened since 2003 due to the continued rise in oil prices. In 2007 and 2008, the slower increase in oil prices and the appreciation of the euro should limit the decline of the current account balance to 0.1% of GDP per year.
Domestic demand growth, which is mainly determined by the evolution of private consumption and business investment, should amount to 3.2% this year and 2% next year. In 2007, private consumption will benefit from a strong rise in employment and in property income, while business investment will be stimulated by the high capacity utilisation rate and the ongoing rise in profitability. Next year, private consumption growth should decelerate due to a smaller rise in real disposable income and less favourable demand prospects should weigh on business investment. Domestic employment should increase by, on average, 61,300 persons in 2007 and 44,200 persons in 2008. As the number of jobs is growing faster than the labour force, broad administrative unemployment is expected to decrease by 57,800 persons this year and 20,400 persons next year. The harmonised Eurostat unemployment rate (which is calculated by means of labour force surveys) is expected to fall from 8.2% in 2006 to 7.2% in 2008.
The evolution of inflation, as measured by the national index of consumer prices, is strongly influenced by the evolution of natural gas prices, which should decline in 2007 and rise substantially in 2008. Consequently, inflation should amount to 1.7% this year and 2.2% next year.
STU 3-07 was finalised on 5 October 2007.Short Term Update 03-07 [Contributor - 30/10/2007]
To improve our understanding of the divergent evolutions that recently emerged between European countries in terms of labour productivity, this working paper compares the labour productivity growth of three small open European countries: Austria, Belgium and the Netherlands. The analysis focuses on market services as they are the most important single factor that is responsible for the divergences.Article 2007100507 [05/10/2007]
The medium-term outlook for Belgium points towards an average GDP growth rate of 2.1% during the period 2007-2012, which is slightly higher than the potential rate (2.0%) and similar to the average growth rate of the euro area. This pace of growth follows a strong rebound in 2006 (3.0%), mainly driven by domestic demand, in a context of an improvement in international economic activity.
The average yearly growth rate for private consumption should reach 1.8% during the period 2007-2012, which is slightly lower than the increase in households’ disposable income. Purchasing power will especially be underpinned by employment growth in 2007 and 2008 and by higher increases in wages and social benefits at the end of the projection period. Investment growth should reach 2.7% during the period 2007-2012, reflecting the path of business investment growth (supported by high business profitability and stable demand prospects), but also an acceleration in public investment at the end of the projection period. Growth in exports should reach 5.7% on average and the contribution of net exports to GDP growth should amount to 0.2%-points. The external surplus, which was strongly reduced between 2002 and 2005, should (slowly) increase from 2007 onwards and attain 3.1% of GDP in 2012. The combination of moderate increases in domestic costs and limited rises in imported costs should allow the inflation rate to remain below 2% in the medium term.
The expected evolution of employment reflects a favourable macroeconomic context, limited wage increases (mainly at the start of the period) and various measures taken to promote employment. After a particularly high number of new jobs created in 2006 (44,000), employment growth should remain sustained: about 38,000 units should be created every year during the period 2007-2012. Between 2006 and 2012, manufacturing industrial employment should fall by 41,000 units but the number of jobs created in market services should exceed 256,000. As the number of newly created jobs is growing faster than the labour force, the unemployment rate (broad administrative statistics) should fall from 13.9% in 2006 to 12.0% in 2012.
Under the assumption of constant policy, public accounts are expected to present a net public financing surplus in 2007 (+0.1% of GDP) and to deteriorate in 2008 (-0.5% of GDP). During the following years, the net public financing requirement should gradually decline and the equilibrium should be restored at the end of the projection period, mainly thanks to a decrease in interest charges on the public debt. Consequently, the total public debt to GDP ratio is expected to decline from 87.5% in 2006 to 69.5% in 2012.
STU 2-07 was finalised on 18 May 2007. Short Term Update 02-07 [Contributor - 05/06/2007]
The objective of this report is to provide an overview of the main drivers of economic growth and productivity evolution in Belgium between 1970 and 2004, based on a consistent data set. The growth accounting methodology is applied to explain value added and labour productivity growth for total economy, manufacturing and market services. This decomposition exercise diverges from what has been applied in Belgium up to now, as it uses capital services flows rather than capital stock to measure the contribution of capital factor to production growth. Contributions of the main industries to value added, employment and productivitygrowth are also estimated. Working Paper 05-07 [16/03/2007]
This Working Paper presents the different methodologies currently used to construct a volume index of capital services and analyzes the effects of methodological changes on capital services and total factor productivity estimates for Belgium over the period 1970-2004. The measurement of capital services is realized in two steps. First, productive capital stocks have to be estimated for each type of asset. Two methodologies are generally used: the geometric and the hyperbolic profile. Secondly, these stocks are aggregated, using the user costs of capital (exante or ex-post approach) as weights to derive an overall index. For the economy as a whole and the entire period, under an ex-post approach, the volume indices of capital services estimated with a hyperbolic age-efficiency profile grow at a higher rate than the indices estimated with a geometric profile. This general conclusion is, however, not observed in every sector. Under an ex-ante approach, the different volume indices are quite similar for the whole economy, even if the indices grow generally at a slightly higher rate in the case of a geometric pattern. A higher growth rate of the volume indices generates a higher capital contribution and, consequently, a lower TFP contribution. Over long periods of time, the different TFP estimates are relatively similar. Over shorter periods, the different methodologies generate more significant variations in the TFP contribution.Working Paper 03-07 [01/03/2007]
In the October update of the FPB medium-term outlook for Belgium, GDP growth reaches an average of 2.3% for the 2006-2011 period. This development will be driven by both domestic demand and exports, although the contribution of net exports to economic growth is expected to be limited. The growth of private consumption (1.9% on average) should be in line with the growth of household disposable income in real terms (2% on average). Gross fixed capital formation should grow by 2.7% (on average). The structural loss of export market shares should remain significant, with exports increasing by 5.5% a year on average, compared with a 6.8% growth in our potential export markets.
After climbing to 2.4% in 2006 because of high energy prices, inflation (as measured by the private consumption deflator) should fall below 2% in the medium term, mainly because of limited wage growth, the increase in interest rates and moderate rises in prices of imports (notably owing to the decrease in oil prices). Total employment is expected to increase by about 38,500 jobs a year during the 2006-2011 period, despite new job losses in manufacturing. The factors behind this performance are: a relatively favourable macroeconomic context, limited wage increases, a further small reduction in working time and various measures taken to promote employment. Nevertheless, the fall in the unemployment rate is expected to be limited due to the substantial rise in the labour force. However, at the end of the projection period - when baby-boomers will leave the labour force on a massive scale - the growth of the labour force should lose momentum, allowing the decrease in the unemployment rate to accelerate.
All in all, economic growth should be stronger for the next six years compared to the previous six years, leading to the same average GDP growth rate during the period 2000-2011 as during the period 1990-1999. At the same time, the pace of employment growth should have nearly doubled (yearly 35,000 on average during the same period 2000-2011, against slightly less than 20,000 yearly during the former decade), reflecting a considerable decline in productivity gains.
This medium term outlook does not take into account the measures taken within the framework of the 2007 budget.
STU 4-06 was finalised on 11 December 2006.Short Term Update 04-06 [Contributor - 15/12/2006]
HEADLINES BELGIAN ECONOMY - OCTOBER 2006
This year, the Belgian economy should register a GDP growth of 2.7%. In 2007, economic growth should slow down to 2.2%.Short Term Update 03-06 [Contributor - 20/10/2006]
In line with the international economic situation, Belgian export growth should strengthen to 5.4% this year and decrease to 4.9% in 2007. The current account surplus should hardly change. In 2006 this is due to the sharp increase in oil prices, which leads to a deterioration in the terms of trade, whereas in 2007 imports and exports should increase to the same extent, while the terms of trade stabilise.
Domestic demand should grow at a slower pace as business investment growth weakens somewhat after last year’s substantial catching-up. This is partially compensated for by a strengthening of public expenditure and especially by private consumption. Private consumption growth should accelerate to 2.3% in 2006 and 2% in 2007 (from 1.1% in 2005), thanks to the increase in households’ real disposable income and (at least in 2006) a further drop in the household savings ratio. Domestic employment should increase by on average 41,000 units in 2006 and 45,600 units in 2007. As the number of jobs is growing faster than the labour force, the unemployment rate (large administrative definition) is expected to diminish from 14.3% in 2005 to 13.7% in 2007. Nevertheless, the harmonised Eurostat unemployment rate (based on labour force surveys) should still increase from 8.4% in 2005 to 8.6% in 2006, only to drop to 8.3% next year.
Headline inflation, as measured by the national index of consumer prices (NICP), should amount to 1.9% in 2006 and 2007 (after 2.8% in 2005). This year, the inflation picture is blurred by the introduction of a new NICP-basket based on the household budget survey of 2004. Measured by the deflator of private consumption, which is not affected by this technical factor, inflation should only drop to 2.4% in 2006 and ease further to 1.9% in 2007. The steady decline in inflation mainly results from the moderate wage cost increase, the appreciation of the euro and the stabilisation of oil prices expected in the course of 2007.
This working paper analyses public financing in two countries that have already reached the Barcelona goal (R&D expenditure on GDP at least equal to 3%), Finland and Sweden, and compares it with the situation in Belgium. This comparison covers not only the quantitative aspects but also the organisational dimension of the public support for innovation.Working paper 09-06 [29/09/2006]
- Planning Paper 101 [20/09/2006]
- HEADLINES BELGIAN ECONOMY - MARCH 2006
In the wake of the economic recovery in Europe, Belgian GDP growth rose gradually from 0.1% in the first quarter to 0.6% in the last quarter of 2005. Quarterly growth should stabilise at 0.6% during the first half of 2006 and remain higher than 0.5% during the second half of the year. On a yearly basis, GDP growth should strengthen from 1.5% last year to 2.2% in 2006.
This year, net exports as well as domestic demand should contribute positively to economic growth. Due to the European recovery, Belgian export growth will strengthen to 4.7%. The current account surplus, however, will increase very little as a result of the high oil prices, which will lead to a negative evolution in the terms of trade. Domestic demand will grow at a slower pace as business investment will weaken somewhat after a significant catch-up and some exceptional purchases in 2005. This slow-down will be partially compensated for by stronger public expenditure – in consumption and investment – as well as stronger private consumption. Consumer expenditure should accelerate to 1.6% as household disposable income is underpinned by employment growth and personal income tax cuts.
After a net gain of 38,600 persons last year, employment is expected to record an average annual rise of 41,100 persons in 2006. The number of jobs is growing faster than the labour force, which should slightly reduce the unemployment rate (broad administrative statistics) from 14.3% last year to 14.1% in 2006. The ‘harmonised’ unemployment rate (Eurostat definition) should decline from 8.4% last year to 8.3% in 2006.
Inflation should fall markedly in 2006 compared to 2005 due to a limited rise in unit wage costs and the fading of the effects of higher oil prices. The inflation picture is somewhat blurred by the persistent deterioration in the terms of trade and by the introduction of a new price index. The private consump-tion deflator should increase by 2.3%, the GDP deflator by 1.9% and the national index of consumer prices by 1.8%.Short Term Update 01-06 [Contributor - 27/03/2006]
- Planning Paper 100 [15/02/2006]
- Working Paper 19-05 [31/12/2005]
- Short Term Update 04-05 [Contributor - 23/12/2005]
- Working Paper 16-05 [29/09/2005]
The medium-term outlook for Belgium (cut-off date: April 30) points towards an average GDP growth rate of 2.2% during the 2005-2010 period, which is slightly higher than potential (2.1%). This pace of growth is expected to take place after a slowdown in economic growth in 2005 (1.7%) and a rebound in 2006 (2.6%). In both years Belgian economic growth should be slightly higher than in the euro area. Recent information makes the 2005 growth figure highly uncertain, with a significant downward risk.
Despite moderate wage increases, the average yearly growth rate of private consumption should reach 1.9% during the 2005-2010 period, particularly thanks to the increase in households’ disposable income (stimulated particularly by reductions in personal income tax and the rise in employment). Investment growth should reach 3% on average during the 2005-2010 period, mainly reflecting the increase in business investment but also an acceleration of public investment in 2005 and 2006. Growth in exports should be 5.5% on average and the contribution of net exports to GDP growth is expected to be 0.2%. Limited wage cost increases, lower oil prices as compared to the average level in 2005 and a negative output gap should allow inflation to remain around 1.8% in the medium term.
The development of employment should reflect the favourable macroeconomic context, the limited increases in wage costs and various policy measures. After the net creation of approximately 29,000 and 21,000 jobs in 2004 and 2005 respectively, about 40,000 jobs should be created every year during the 2006-2010 period. Between 2004 and 2010 industrial employment should fall by 51,000 persons and the number of jobs created in market services should exceed 270,000. Nevertheless, in view of the growth in the labour force (mainly in the 50-64 age group) the fall in unemployment will be limited to 50,000. The unemployment rate (broad administrative statistics) is still increasing in 2005 (from 14.4% to 14.6%), but it will subsequently fall to 12.9% in 2010.
Under the assumption of unchanged policy, the public accounts are expected to show a clear deterioration, with a net public sector borrowing requirement appearing in 2005 (0.5% of GDP) and widening to 1.5% of GDP in 2006 before gradually declining to 0.7% of GDP by the end of the projection period. Nevertheless, the total public debt to GDP ratio is still in decline, from 95.8% in 2004 to 82.6% in 2010.Short Term Update 02-05 [Contributor - 17/05/2005]
In 2004, economic growth in Belgium amounted to 2.7% (GDP at constant prices), which is higher than the euro area average due to the strength of Belgian domestic demand. The economic recovery, triggered by an improvement in the international business climate from mid-2003 onwards, resulted in quarter-on-quarter growth rates between 0.7% and 0.8%, but weakened to 0.4% in the last quarter of 2004.
Economic growth should gain momentum during the course of this year, which is mainly due to the quarterly profile of exports. In fact, export growth should temporarily weaken during the first half of this year due to lower foreign demand growth and the appreciation of the euro during the last two quarters of 2004, which hampers competitiveness with respect to the other currency areas. Private con-sumption (+1.8%) should increase at a faster pace than purchasing power (+1.4%) for the third con-secutive year. Stimulated by the ongoing recovery of business profitability, low interest rates and gradually improving demand prospects, real business investment growth should strengthen to 3.3% this year. All in all, GDP growth at constant prices should reach 2.2% in 2005. Inflation should re-main rather stable at 2.0%.
Employment should increase by 34,400 units this year, as compared to 28,600 in 2004. As the labour force should increase at about the same pace in 2005, the unemployment rate should stabilise this year. The employment rate should rise slightly from 61.8% in 2004 to 62.1% in 2005.Short Term Update 01-05 [Contributor - 25/03/2005]
Following the Lisbon strategy designed to transform the European economy into the most competitive and dynamic knowledge-based society, the Barcelona Summit quantified one of the available instruments to reach this ambitious objective by fixing the amount of resources which have to be devoted to r&d by 2010, at 3% of the European gdp.
Working Paper 03-05 [14/03/2005]
What could be the implications of the Barcelona objective in terms of the main economic variables for Belgium and the eu? What are the needs for human capital to reach this objective? How are these needs covered by the current trends in the supply of qualified labour in Belgium? These are the main questions analysed in the present working paper.
The latest update of the FPB’s medium-term outlook for Belgium shows average GDP growth reaching 2.3% during the 2004-2009 period. This development can be largely accounted for by domestic demand, whereas the role of (net) exports is expected to be more limited. As in 2003, private consumption should evolve in quite a dynamic way during the projection period (1.9% on average), mainly as a result of an expansion of households’ disposable income. At the same time, gross fixed capital formation (and particularly business investment) should recover, with annual growth reaching 3%. The structural loss of export market share should be confirmed with exports increasing by 5.3% a year on average, compared with growth of 6.3% of our potential export markets.
Inflation should remain slightly below 2% in the medium term, mainly thanks to limited wage increases and moderate rises in imported costs. Employment is expected to increase by about 32,000 jobs a year during the 2005-2009 period. This performance can be explained by several factors: a relatively favourable macroeconomic context, limited wage increases, a reduction in working time and various measures taken to promote employment. At the same time, the working population should rise considerably. As a consequence, despite the creation of many jobs, the fall in the unemployment rate should be very limited.
The FPB’s October update of the medium term outlook for Belgium does not yet take into account the measures decided within the framework of the 2005 budget.Short Term Update 04-04 [Contributor - 17/12/2004]
The medium-term outlook for Belgium is pointing towards a GDP growth rate of 2.2% during the 2004-2009 period, which is slightly higher than potential (2.0%). This favourable development is due to both net exports and domestic demand. Private consumption should become more dynamic during the 2005-2009 period, particularly thanks to the increase in households’ disposable income (especially due to tax reforms and increases in employment and social benefits). Investment growth should attain 2.9% during the 2004-2009 period, mainly reflecting the increase in business investment. After ini-tially accelerating in 2004, average export growth should be 5.4% and the contribution of net exports to GDP growth should be 0.2%. Thanks to limited increases in wages and import costs and a negative output gap during the first few years of the projection, the inflation rate will remain below 2% in the medium term.
The development of employment should reflect the favourable macroeconomic context, the limited in-creases in wage costs and various policy measures. After net losses in 2002 and 2003 and the creation of almost 9,000 jobs in 2004, about 30,000 jobs should be created every year during the 2005-2009 period. Industrial employment should fall by 44,000 persons during the 2004-2009 period and the number of jobs created in market services should exceed 200,000. Nevertheless, given the increase in the labour force (mainly in the 50-64 age class) the number of unemployed will barely decrease at all. The unemployment rate (broad administrative statistics) is still increasing in 2004 (from 14.1% to 14.4%), but will subsequently fall to 13.5% in 2009.
The public accounts are expected to show a clear deterioration, with a net public sector borrowing re-quirement appearing in 2004 and widening to 1.4% in 2006 before gradually declining to 0.7% by the end of the projection period.Short Term Update 02-04 [Contributor - 26/05/2004]
- Working Paper 10-04 [20/04/2004]
- Planning Paper 94 [15/01/2004]
The latest update of the FPB’s medium-term outlook for Belgium is pointing towards GDP growth of 2.3% on average from 2004 to 2008. This development can be largely accounted for by domestic demand, whereas the role of (net) exports is expected to be more limited. After moderate growth in 2003, the evolution of private consumption should be more dynamic during the 2004-2008 period, particularly thanks to a favourable development in households’ disposable income (stimulated especially by reductions in personal income tax). The growth in gross fixed capital formation should reach an average of 2.9% during the period 2004-2008, notably reflecting the expansion in business investment. Export growth should be 5.1% on average, compared with growth of 5.6% in our potential export markets: the structural loss of export market share should be confirmed.
Inflation should be below 2% in the medium term, thanks to moderate wage increases compatible with productivity gains, cuts in social security contributions and the extension of production capacity. Employment is expected to show a gradual improvement: an average increase of 34,000 jobs should be seen during the 2004-2008 period. The unemployment rate in a broad sense should decrease from 14.2% by mid-2003 to 12.8% in 2008, a large proportion of the labour expansion being absorbed by growth in the labour force.
Given the present prospects for future economic growth, assuming no policy change but taking into account the most important measures decided within the framework of the 2004 budget, the financing capacity of public administrations should go into deficit in the medium term (0.5% of GDP in 2008). The goal of a positive financing capacity (0.3% of GDP in 2007) is not expected to be reached without additional budgetary measures. Nevertheless, the total public debt to GDP ratio should continue to fall, going down by about 17 percentage points between 2002 and 2008.Short Term Update 04-03 [Contributor - 04/12/2003]
- IT 01-2003 [25/06/2003]
In the first half of 2002 the world economy seemed to recover from the sharp decline during 2001. This recovery was not, however, confirmed during the second half of the year.
In this muddled international business climate, the recovery of the Belgian economy is postponed until the second half of 2003. In annual average terms, GDP should grow this year by 1.3%. For the first two quarters of this year, positive but very modest GDP growth is assumed. Growth should be higher during the second half of the year, but clearly not as high as seen in previous economic recoveries in 1996 and 1999. Under these circumstances, the employment rate should fall for the second consecutive year, thus scoring 0.6 points lower than its previous peak in 2001. Consumer price inflation should remain rather stable at around 1.4%.
As economic agents are at present spellbound by the growing threat of a war in the Middle East, and the outcome of that conflict situation is hard to predict, the uncertainty margin surrounding the international economic context, is of course extremely high.Short Term Update 01-03 [Contributor - 10/03/2003]
Network industries are industries whose activity involves conveying people, products or information from one place to the other via some kind of physical network. They include transport networks, information networks and utility networks. Network industries basically consist of three types of activity: upstream activities involving the production of core products such as equipment and means of transport; infrastructure activities involving the construction, maintenance and operation of the physical network; downstream activities involving the delivery of network services to final consumers. Network industries have specific characteristics from an economic point of view. Three of these are particularly notable, the last one also from a social perspective.
Working Paper 01-03 [31/01/2003]
- In October, the FPB updated its medium-term outlook for Belgium until 2007. This projection is pointing towards a GDP growth of 2.5% on average from 2003 to 2007. This development can be largely accounted for by domestic demand, whereas the role of (net) exports is expected to be more limited. Private consumption should be more dynamic during the forecasting period than during the nineties thanks to a favourable development in households’ disposable income (stimulated especially by reductions in personal income tax). The growth in gross fixed capital formation should attain an average of 2.9% during the period 2003-2007, notably reflecting the expansion in business investment. Export growth should be 5.1% on average: the structural loss in export market share should be confirmed and the contribution of net exports to GDP growth is expected to decline.
The inflation rate should be below 2% in the medium term. Assuming no shocks on commodity prices, the main domestic factors behind this moderate inflation are wage increases compatible with productivity gains, cuts in social security contributions and the extension of production capacity.
Employment should show a gradual improvement: an increase of 33,000 jobs on average should be observed during the 2003-2007 period (as compared with an increase of 40,000 jobs, on average, during the 1996-2000 period). However, a large proportion of the labour expansion should be absorbed by an increase in the labour force. Therefore, the unemployment rate in a broad sense should only decrease from 13.5% by mid-2002 to 13.2% in 2007.
Assuming no policy change but taking into account (as far as possible) the measures decided within the framework of the 2003 budget, the financing capacity of public administrations should be close to balance between 2003 and 2006 and a small surplus would be observed in 2007. Taking into account the computed output gap and the resulting cyclical budget component, the structural (cyclically adjusted) balance would be positive but slightly declining from 2002 onwards.
The objective of a positive financing capacity (0.5% of GDP in 2005 as mentioned in the new Stability Program for Belgium) is not expected to be reached without additional budgetary measures. However, the total public debt to GDP ratio should continue its decline, but at a slower pace if compared with the 2001 forecast. The decrease should represent about 21% of GDP between 2001 and 2007.Short Term Update 04-02 [Contributor - 29/11/2002]
The macroeconomic results presented here - as summarised in Table 2 - are based on ICT investment expenditure data that are compatible with the data of the 1995 input-output. As the level of the revised ICT investment expenditure is larger than the ICT investment expenditure used in WP 7-02, the results of the growth accounting exercise point to a somewhat larger contribution of ICT Capital accumulation to growth.
Working Paper 08-02 [08/10/2002]
In this paper, the impact of ICT on economic and productivity growth is investigated in the context of the Belgian economy. The analysis is conducted at aggregate and branch level. The impact of ICT on economic growth through productivity gains can be transmitted via three different channels, namely increase in the ICT capital available per worker (capital deepening), technical progress in the ICT producer sectors (TFP growth) and finally, technical progress in the ICT user sectors through spillover effects (TFP growth).Working Paper 07-02 [22/07/2002]
- Planning Paper 92 [24/01/2002]
Information and communication technology (ICT) has become a significant economic activity in most industrialized countries as well as an important engine of innovation and changes in the rest of the economy. It has been recognized as one of the key factors boosting productivity growth and hence business sector competitiveness. Various initiatives have been recently adopted at regional, national and European levels in order to meet quickly the new challenges of ICT use and diffusion in Europe. A growing number of indicators are now available in order to assess the position of each country or region in terms of ICT development and to guide policy decisions in that field. The aim of this report is to provide a clear and succinct view of the relative development of ICT in Belgium by analyzing both the production and the diffusion of ICT in our economy 1 and to highlight the main weaknesses and strengths of the Belgian economy in that area. Even if the sector has been recently characterised by stock markets ups and downs and numerous bankruptcies, production of ICT goods and services has contributed significantly during the nineties to the growth of economic activity and employment in some industrialised countries as for instance in Anglo-saxon and Scandinavian countries. Has Belgian economic activity benefited from the boom in the ICT sector to the same extent as other industrialised countries? What kind of development can be expected in the future? These are the main questions addressed in the part of the report devoted to the analysis of the Belgian ICT production sector.Working Paper 01-02 [15/01/2002]
During the past one and a half years, the world economy has been hit by a series of shocks, notably the large rise in oil prices, the abrupt slowing of growth in the United States (initiated by the bursting of the speculative bubble in the ICT sector) and the events of 11 September. This resulted in a synchronised slowdown in the three major economic regions (the United States, Japan and the European Union) and a pronounced downturn in world trade.
It is obvious that Belgium, being a ‘small open economy’, cannot escape the prevailing slowdown in the world economy. The forecasts for all components of final demand have therefore been revised downwards for both 2001 and 2002 as compared to our July projections. Under these circumstances GDP would not exceed a growth rate of 1.1% this year and 1.3% in real terms next year. These average annual growth rates are based on slightly negative growth figures (quarter-on-quarter) during the second half of this year, while positive and steadily increasing quarterly growth rates should be recorded in 2002 due to a recovery in exports.
Domestic demand should increase by only 1.1% both this year and next, while average growth over the last five years has amounted to 2.5%. Exports should suffer from slackening world demand in 2001, consequently growing by only 0.8%. In 2002 exports should accelerate and reach an average annual growth of 2.8%, which is much slower than in the second half of the 1990s.
The uncertainties surrounding these forecasts in the present political and economic situation should not be underestimated. The scenario on which the present forecasts are based assumes that the loss of consumer and business confidence will be of short duration, implying that the US economy will recover quickly next year. The consequences of the terrorist attacks of 11 September and the military response to those attacks may, however, have a more prolonged impact on investors’ and consumers’ confidence. As a final remark, it has to be underlined that the economic forecasts published in this STU were finalised before Sabena was declared bankrupt.Short Term Update 04-01 [Contributor - 13/11/2001]
The Belgian economy has entered a period of strong cyclical growth since activity accelerated strongly in the second half of last year. Benefiting from an important positive carry-over effect, the increase in GDP should be 3.8% this year. Next year economic growth should be 3.1%.
Despite two consecutive years of strong growth, pressure on the goods and labour market should remain limited. The sustained growth in business investment and a rise in the labour supply could raise potential growth in Belgium. In the special topic of this issue, it is shown that this increase in the labour supply should result from higher participation rates.
Moreover, the acceleration in the general consumer price index seen in recent months and the rise in our inflation forecast for the year 2000 are only marginally influenced by domestic cost components in general, and by wage costs in particular, but can principally be explained by the increase in import prices, especially oil prices, whose effect was strengthened by the fall in the effective euro exchange rate.
As in 2000, economic growth in 2001 will be broadly based. It will be stimulated by a positive contribution from foreign trade and a still vigorous domestic demand, despite a slowdown following the very dynamic expansion of domestic demand this year. Growth of private employment will hardly weaken in 2001. The improvement in employment during the 2000-2001 period will lead to a further increase in the employment rate. From 1995 to 2001, the employment rate should gain 3.4 percentage points in all.Short Term Update 03-00 [Contributor - 05/07/2000]
- Relocation 2000 [15/06/2000]
- Working Paper 04-00 [15/05/2000]
Economic activity in Belgium increased strongly during the second half of last year thanks to the net improvement in export growth as well as sustained internal demand. On average, GDP growth reached 2.5% in 1999, confirming the scenario of a short-lived slowdown between mid-98 and mid-99.
The upward trend in nearly all demand components will result in a positive carry-over effect for the year 2000. Moreover, leading indicators are so far pointing towards a further improvement in economic growth in the first half of the current year, with growth stabilising at a high level in the third quarter. This year, Belgian GDP growth should reach 3.2%. Internal demand will be boosted by sustained growth in private consumption, thanks among other things to a high job creation rate (+1.4%), and also by a positive contribution from stockbuilding towards economic growth (+0.3%). The contribution of external trade (+0.4%) will be favoured by the dynamism of world trade and the improvement in price competitiveness. The public sector borrowing requirement should diminish and nearly reach equilibrium (-0.1% of GDP), thanks to the fall in interest payments and the increase in the primary surplus.
The medium-term outlook for Belgium is pointing towards a GDP growth rate of 2.6% per year during the 2001-2005 period, mostly supported by exports and business investment. The economic fundamentals of the euro area should be the main driving force behind those prospects: fiscal consolidation should not require new measures and the slightly accelerated pace of inflation (around 2% in the medium term) in Europe should not threaten price stability and the low level of real interest rates. Despite the further significant decrease of the unemployment rate in the euro area, acceleration in wage inflation should be limited.
Annual employment growth in Belgium should be around 0.8% between 2001 and 2005. The labour force will still increase in spite of unfavourable demographic developments (the baby-boom generation is entering the 55-60 age range), thanks to higher participation rates among females and over-50s. The acceleration of wage inflation in Belgium should be broadly in line with the average of our three main trading partners. The pace of growth in consumer prices should be around 1.5% on average between 2000 and 2005. On the basis of a “no change in policy” scenario, the general government financing capacity should become positive from 2001 onwards. Compared to the budgetary target set out in the 2000-2003 stability program (surplus of 0.2% GDP in 2003), “cumulative budgetary margins” will reach 2.2% GDP in 2005.Short Term Update 02-00 [Contributor - 04/05/2000]
The recovery in world economic growth in 1999 led to a strong acceleration in economic growth in Belgium during the second half of 1999. Faced with improved prospects, the manufacturing sector is expected to build up stocks again from the fourth quarter of 1999 onwards, after having strongly reduced their stocks during the recent economic slowdown (mid-1998 to mid-1999).
Fixed capital formation in non-industrial sectors increased strongly in 1999, private consumption grew at a relatively sustained pace, and the contribution from external trade was positive. For 1999 as a whole, economic growth in Belgium reached 2.3%. The upward trend of all demand components in the course of 1999, if confirmed, will lead to a positive carry-over effect for the year 2000.
Economic activity in Europe should accelerate in 2000, US economic growth should be sustained and the emerging economies should continue their recovery. Belgian export markets should then grow faster in 2000 than in 1999. Moreover, the depreciation of the euro during the 1999-2000 period and the new cuts in non-wage costs should boost the price competitiveness of the Belgian economy. For the first time for more than 10 years, Belgium should even slightly increase its market shares.
The contribution of stockbuilding towards economic growth should be largely positive, the rate of investment by companies should rise again and household investment should recover. The growth in household disposable income should reach 2.3% in real terms in 2000 (1.4% in 1999), thanks to a new strong creation in employment, a slightly higher growth in real wages and an increase in capital income. Private consumption should rise by 2.1% leaving the savings rate quasi unchanged.
All in all, Belgian GDP growth should reach 3.2% in 2000, thanks to dynamic domestic demand (2.9%) and a net contribution from exports (0.4%).
Oil prices more than doubled between December 1998 and December 1999. Energy prices are not, however, expected to continue rising in 2000, while underlying inflation should accelerate somewhat in the course of the year. The consumption price index should increase by 1.5% in 2000 (compared with 1.1% in 1999) and the health index by 1.3%.
Growth prospects for 2000 should allow a further reduction of the public deficit.Short Term Update 01-00 [Contributor - 28/02/2000]